El Salvador’s finance minister, Alejandro Zelaya, has revealed that the so-called “Bitcoin bonds” will be issued between March 15 and March 20.
$1 billion for El Salvador with Bitcoin Bonds
With these bonds issued on Blockstream’s Liquid Network based on the Bitcoin blockchain, the country aims to raise $1 billion, with a coupon of 6.5%.
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A few days ago, Samson Mow, Blockstream’s Chief Strategy Officer and main architect of these bonds revealed that verbal commitments for more than $500 million have already been raised up to a few weeks ago.
The assumption, therefore, is that it may not be challenging to reach the $1 billion target by mid-March.
In December, the pledges collected came to $300 million, increasing by more than 66% since then.
Minister Zelaya estimates that the bond will be underwritten in excess of 500 million and states that it will comply with all regulations currently in force in the financial markets.
The bond will be sold in $100 tranches to “democratize access,” thus allowing both large institutional investors and small retail investors to participate.
Half of the $1 billion they plan to raise will be used to build mining infrastructure, while the other half will be used to buy more BTC.
They plan to issue 9 more similar bonds in the future, specifically to finance the construction of a new city, Bitcoin City, and pay off their debt to the International Monetary Fund (IMF).
El Salvador downgraded
The key issue is probably El Salvador’s relationship with its IMF creditor. Precisely because of its debt, rating agency Fitch downgraded the country’s credit rating from “B-” to “CCC,” citing precisely the adoption of Bitcoin as legal tender as a key factor that influenced this decision of theirs.
However, according to the director of asset manager VanEck, Gabor Gurbacs, the decisions made last year by President Bukele actually improved El Salvador’s economic outlook, so he considers this downgrade incorrect.
On the one hand, there are the concerns of those who believe that these investments in Bitcoin are too risky and that the country could end up not being able to repay its debt by going into bankruptcy. On the other hand, improved economic prospects could lead the State to collect more resources than in the past, with perhaps fewer problems regarding its ability to repay debts.
Much will undoubtedly depend on how the price of BTC evolves in the coming months.